travelBulletin

The End of Last Minute Cruise Pricing?

Some years ago travelBulletin was chatting to a now former senior cruise executive at an event overlooking Sydney Harbour. As we talked, one of the company’s ships berthed at the Overseas Passenger Terminal and departed for a South Pacific voyage, and I asked whether the vessel was sailing full, writes Bruce Piper.

hammock low res 2 copyBy Bruce Piper

Some years ago travelBulletin was chatting to a now former senior cruise executive at an event overlooking Sydney Harbour. As we talked, one of the company’s ships berthed at the Overseas Passenger Terminal and departed for a South Pacific voyage, and I asked whether the vessel was sailing full.

“It had better be, or I’ll be getting a call in a few minutes from head office overseas to explain why not,” the cruise chief remarked – reflecting the pretty much industry-wide policy of ensuring that inventory is always fully utilised. However, recent remarks by Royal Caribbean Cruises Limited chairman Richard Fain have signalled that a switch in policy is in the works – and that may be bad news for bargain hunters.

Cruise passengers – particularly retirees who are able to be flexible with their departure dates – have long taken advantage of the well-known “always sail full” policy, often waiting until the last minute to make bookings to ensure steep discounts. Cruise lines also offered exceptional “travel industry family and friends” deals on less-popular sailings, which could be accessed by pretty much anyone who had a loose acquaintance with someone working within the travel sector.

While occupancy has been a key metric for the cruise industry, this 100% full policy has certainly affected yield, particularly with the rise of the internet which has seen an increasing ability for web-savvy cruisers to access the plethora of last minute deals. As well as these last-minute bookers getting their holidays at bargain basement prices, this has also, in some cases, impacted guest satisfaction as those on board boast about the cheap prices they paid, disconcerting others who booked further ahead and paid top dollar.

However, according to Fain, the golden days of last minute cruise bargains may be coming to an end. Speaking after a recent earnings announcement by Royal Caribbean, Fain said there would be a significant shift in policy, with Royal Caribbean and Celebrity Cruises both ceasing last minute price cuts.

He vowed that after a certain threshold, RCCL brands would no longer continue to drop prices. “Depending on the type of cruise, that last minute may be 10, 20 or 30 days out. From that point on, we will hold our price at the prior level,” Fain said. He conceded that this might mean some Royal Caribbean vessels would cruise at less than 100% occupancy – but in the longer term the “price integrity” would be good for the brand and improve net revenues.

“It was really important to strengthen our brand, because in the long run it is our brand that is going to drive our yield improvements,” he said. Although Fain was referring to voyages out of North America, RCCL’s UK chief Michael Bayley also backed the initiative, saying that “from 2016 the price will never drop… there will be no discounts beyond 30 days from departure”.

“We are not doing anybody any favours by discounting. We work too hard developing these phenomenal products to then charge too little for them,” Bayley said.

RCCL’s policy shift follows similar rhetoric by Carnival Corporation, which in late 2013 signalled a strategy of staying strong on pricing at the expense of slightly lower occupancies. And while Norwegian Cruise Line hasn’t issued a “specific pricing promise,” president Andy Stuart has confirmed that “it is our goal to raise pricing as we get closer to sailing” – a policy similar to that adopted by more upscale cruise lines such as Crystal Cruises.

This is all good news for travel agents, who will hopefully no longer be caught out when they manage to secure a great deal for their clients, only to have the rug swept from under their feet by a cruise line desperate to fill some last minute berths. The policy shift is also a great motivator for consultants to use with their clients, who should be informed that the good times of last minute deals could be coming to an end.

However one major caveat to the policy change is the massive growth of capacity – particularly in Australia where cruise lines seem to be constantly adding new ships. Industry observers will be keenly watching to see whether the new rhetoric on last minute pricing matches reality, or if it will just be too tempting for cruise executives to lock in some last minute bookings by putting cheap fares on sale.

One avenue to watch will be the various group-buying “deals” sites, where in recent months some major operators have been observed selling South Pacific voyages from just $99 per person for a week. Cruise lines have declined to comment on the specifics, hinting that these steep discounts on sites such as Webjet Exclusives are being funded by the deal providers themselves in order to boost traffic and attract new customers.

Subscribe To travelBulletin

Name(Required)